New Form   Lean JIT Explained Kenneth A. Wantuck, CFPIM, CPM INTRODUCTION This paper will describe the vital elements that must be implemented by any company that aspires to world class performance, explain why they are necessary and show how they intertwine and support one another. It will also show how many of today’s popular strategies omit certain key elements that doom them to failure. It concludes with a recipe for success that will enable a determined company to become the very best in its field. No matter what you call it, a rose has distinctive components that make it instantly recognizable. The same should be true for the process to achieve world-class competitive levels. But, acronyms like TQM, MRPII, JIT and CIM, catch phrases like manufacturing excellence, team building or reengineering the factory, along with the latest “program of the month” promotions have caused more confusion than clarity. Today, the operative word is LEAN. The bottom line, however, is not the name. It is the process. JOUSTING WITH JARGONISM Every year, it seems someone invents a new term for an old thing or modifies one to make it seem new. Obviously, this helps sell books, magazines and consulting services. It also gives us new “buzz words” to help us impress our bosses and associates. Unfortunately, it also creates false impressions and hopes about “instant cures”. The trouble is, people are using terms like TQM, SPC, MRP, JIT, EI, CIM and LEAN like interchangeable “silver bullets to shoot the werewolf”. They get so caught up in the jargon, they often don’t understand what it really means and end up shooting themselves in the foot, or worse. Everything needs a name, for convenience if nothing else. If we’re all singing from the same sheet of music, the song title immediately brings the melody to mind. But, what happens if you haven’t seen or heard the original music and get your input from hearsay or reading about it? What tune do you hear compared to others when that title is mentioned? It’s probably nothing like the composer wrote or intended. It’s no different in business, when we talk about all those wonderful “magic elixirs” to instantly improve the health of our companies. Unfortunately, there are hundreds of misunderstood names we must contend with today. The worst part is that some people have been talking about some of these things for such a long time they seem to have convinced themselves that they are actually doing them. But, in the words of St. Ignatius Loyola, “To know and not to do is not to know.” It’s in the doing, or attempting to do, that the dilemma of today’s jumble of jargon creates the most difficulties. How then, can we separate the truth from the clutter? BACK TO THE BASICS Even the goal of attaining world-class performance levels means different things to different people. What performance? What level is high enough? Who says so? And, if we can agree on the target, what elements are necessary to reach it? Are they all necessary or can we pick and choose the ingredients that appeal to us? What about the proportions? Can we season to our own taste or is the customer the ultimate judge? Back in the days when I started my career, the three main requirements to be successful on a bid were Price, Delivery and Quality (we called it the PDQ factor). Prices had to be competitive (lowest was best, of course), delivery was as required by the customer’s schedule (which usually gave some consideration to quoted supplier lead-times), and quality was meeting specifications (at least most of the time). Later, when two or more suppliers were almost equal in the PDQ factor, service entered the picture as a tiebreaker. If we had our “druthers” today the dream-world supplier would offer us perfect products or services immediately upon request (sometimes even anticipating our needs before we asked), and do it almost for free. The reason for this model change is that some companies are getting closer and closer to actually doing that. A world class supplier today can produce almost perfect products to customer order in incredibly short lead-times at unbelievably low prices, while pampering the customer in every possibly way. What’s that? You say you can’t, shouldn’t have to, or won’t try to do that? With that attitude, just watch your business get siphoned away by those who will. Whether we like it or not, those are the new rules of the game, and it’s impacting some industries faster than others. What’s important to remember, and totally ignored by both the “magic pill” seekers and peddlers, is that all of these are necessary to satisfy today’s customers. (Actually, all were required yesterday, as well, there’s just a big difference in degree.) Therefore, a world-class company is going to strive for: Perfect quality Lowest price Immediate build-to-order Regal customer service All four are needed at the same time. These are not trade-off options. The customer wants them all, and will not be satisfied with less. WHAT IT TAKES TO WIN World-class performance demands a company strategy that embraces simultaneous quality and productivity improvements that don’t stop until perfection is reached. Since this can only be achieved by people working together, it can’t be automated or programmed in a computer. It is a continuous process that feeds on the synergism of human teamwork, focused on satisfying all of the customers’ price, quality, delivery and service wants. Notice, I said wants, not what we might care to perceive as needs. When I first learned about what the Japanese called JUST-IN-TIME or JIT, in the late 1970’s, it addressed all of those issues, and that is how I implemented it. Somehow, in the intervening years the “experts” managed to fragment and distort the original meaning of that process to the jumble of junk we have now. To a huge number of misinformed people today, JIT is a quick delivery system foisted on an unsuspecting supply base or an inventory management procedure. Quality is promoted under various TQM labels, which ignore productivity concerns. (The “goodness” of quality will not win customers at noncompetitive prices. In fact, Tom Peters now believes that TQM is “fatally flawed.”) Team building has been promoted as a way to create a mystical, problem-solving, money-saving force that can operate in a near vacuum. (Such programs usually die in a few years for lack of leadership from a disappointed management.) Many of the JIT productivity elements, like group technology cells, setup reduction and pull system cards, have been implemented in isolation of one another, resulting in partially effective “islands” of change. (A job shop full of partial cells is hardly better than a job shop of functional departments. Neither reaps the productivity advantages of JIT focused flow manufacturing.) In fact, it’s been fouled up so completely that I’ve started calling the original strategy LEAN JIT to differentiate it from the smorgasbord that’s out there today and, frankly, to help people understand that it is identical to what many call Lean Manufacturing today.. Whatever you call it (I encourage my clients to make up a name of their own), the most important thing to remember is that the winning process is like a good recipe. All of the proper ingredients in the right proportions, properly blended and nurtured in the right environment are necessary. If you decide to omit something that doesn’t appeal to you (“We can’t share that kind of information with the employees.”) or that you’re afraid to try (“Our volumes are much too low to try mixed-model scheduling.”) then you won’t get what you expected. But, whose fault is that? THE LEAN JIT RECIPE First, you need a strategic envelope that will guide all of the tactical decisions that will be necessary as you move to world-class performance. That strategy must simultaneously encompass the essence of customer satisfaction: best quality, lowest prices, fastest delivery and regal service. While tactical elements can be implemented sequentially, the biggest mistake most companies make is failure to adopt the total strategy up front. That’s why I use a coin to describe the LEAN JIT strategy. It has two facets, the productivity and quality sides, but the two are part of the same whole and cannot be separated. Productivity Principles The productivity strategy requires that we abandon the traditional approach of trying to out-guess the customer to compensate for a slow manufacturing process and replace it with an immediate response, build-to-order process. To do that, we have to eliminate every wasteful, time-consuming practice and investment in the business that doesn’t add value for the customer to get truly “lean and mean”. The ultimate goal is to produce one-at-a-time, in any flavor with near-zero lead-time. Obviously, this cannot be achieved in one step, so the guiding principle for this strategy is one of continuous improvement that, in turn, can only be accomplished by the nurturing of all the human brainpower in the company. These improvements will lead to the elimination of all the contingency investments we’ve made, “just-in-case” something might go wrong. Finally, because so much of our traditional approach to business has been short-term oriented (as demonstrated by the “instant-return” and “break-through” schools of wishful thinking), we must recognize that this is a major cultural change to our company which can only be achieved as part of an evolutionary, long-term strategy. Quality Principles The productivity principles improve reaction time and reduce costs by eliminating waste, but these are only possible with a corresponding set of quality principles. For example, making only one-at-a-time in immediate response to exact customer demand means that each one has to be perfect. The only way to do that is to make every person in the system personally responsible for his or her work to a personal customer that can be “looked in the eye”. Given the proper tools for process control and problem-solving, along with a management environment that draws the line at process capability and says we stop and fix anything beyond it, coupled with a visibility management system that invites people to help one another instead of posting “keep out” signs, value-adders can continuously improve quality levels in the quest for perfection. A rigorous productive maintenance program is also a necessary part of this strategy since most processes have some equipment dependency and waste elimination removes all surplus equipment. The People Factor LEAN JIT can only be implemented through empowered, self-directed teams of people who synergize their collective brainpower in a consensus manner within a defined charter. (In other words, they must work within predetermined rules and limits or else the result would be anarchy.) To make this possible, major changes are required in the company culture. Management must create workable charters or leave a vacuum by default. Policies are needed to stabilize the workplace and motivate people to continuously improve. Management practices and style must transition from the autocratic boss (“I think, you do”) to a team-building coach who trains, inspires and leads the team to places it’s never been. Individuals must learn to work together as equals in peer groups that take initiatives and operate decentralized enterprises, which can respond rapidly to customer demand changes without bureaucratic delays. All of these are significant cultural changes (shocks, in some companies) which will require a formal, organized program to evolve to the new style over a period of years. Both managers and team members, or “associates”, must first experience the new culture in a non-threatening, “laboratory” situation before trying to phase it into the workplace. It is not easy. Nor is it optional. It is the “table stakes” of LEAN JIT. Focused Flow Manufacturing Even the best teams will have difficulty achieving world class performance in a traditional plant, where each persons perspective is limited to a very narrow range of work. LEAN JIT plants are organized into focused factories and group technology centers, which produce families of finished products or “salable” components and subassemblies, which “flow” through the work centers one piece at a time. In these enterprises, every worker can, and usually does, perform all of the operations in the work center, which magnifies their perspective by orders of magnitude for their subset of the business. This type of physical arrangement, coupled with the empowered teams, leads to an incredible increase in productivity, quality and improvement actions. Either one alone, in isolation from the other, can lead to really big disappointments. Within the enterprise work centers, many traditional indirect functions, like inspection, material handling, scheduling, machine setup, minor machine maintenance, packaging, housekeeping and even work distribution are done by team members as part of their do-it-all job assignments. As a result, fewer pieces per person are manufactured when compared to previous direct labor standards, but far more pieces per person are made when compared to the combination of all the previous direct, indirect and salaried labor in the process. Between enterprises, a customer-supplier relationship exists as usable entities are shipped to meet actual downstream demands. This is difficult, if not impossible to achieve, unless the enterprises are self-contained, as if they were outside suppliers. Kanban “Pull” Scheduling and Control To maintain the flow between work centers, setup reduction efforts are undertaken to reduce setup costs to “non-events,” making smaller and smaller lot sizes possible. (It’s much easier for grains of sand or small stones to “flow” than it is for irregular rocks and boulders.) Uniform scheduling methods are then used to reserve capacity for families of parts, with some of each part variation planned to be produced each day and “mix” changes accommodated easily and almost invisibly on the shop floor. Computer systems are simplified to take advantage of their power, where useful, and to eliminate wasteful transactions or unnecessary reports. When the scheduling system is based on flow production of small quantities, small amounts of material can be provided to all workstations and replenished as consumed. The replenishment signal is usually a Kanban card, which is sent to the supplier as needed. The same system can be used for both inside and outside suppliers. Because Production Control calculates and distributes the Kanban cards every month, they can control the level of production and incoming materials better than ever thought possible in the past. However, it won’t work in traditional, operations-oriented plants, which produce large lot sizes with long lead times. Supplier Partnerships Traditional supplier relationships don’t work very well in a LEAN JIT enterprise, either. Genuine partnerships must be forged with single sources of supply for entire families of parts, who will deliver certified-quality material to the customer’s point of use in small quantities at frequent intervals while continuously reducing costs and prices. The LEAN JIT customer will offer long-term agreements for these advantages, along with stable capacity demands, rapid communication of small incremental changes in requirements and strategic information sharing in a true partnership fashion. It’s a higher-risk, higher-reward strategy that only works when both partners win! Transport innovation also changes the delivery system. Instead of high-cost commercial carriage, regularly scheduled “milk runs” for inbound material, using contract carriage partners enable the customer to receive twice as many shipments, (often right to the point of use), while cutting total transport costs in half. Long distances are overcome by rapid communications, coupled with production regularity and enough lead time to cover the distance traveled. When done correctly, a third-party carrier can become a recognized extension of the customer, welding the connection to the supplier-partner MAKING IT HAPPEN Given the right ingredients, they must be combined in the proper process to achieve LEAN JIT. When a fine recipe for an award-winning dish calls for several hours of baking at a low temperature, you can’t “speed it up” by substituting a microwave oven and expect to get the promised results. Completeness and time are the essentials of success. Impatience, more than anything else, has sabotaged too many implementation efforts. But, there’s more… Health professionals tell us that fad diets do more harm than good. Even when they produce short-term reductions, they are accompanied by a feeling of deprivation and the lost weight is usually regained. (A 1992 U.S. News and World Report study of 850 companies showed that, while public announcements of downsizing raised stock prices by an average of 8% in the short-term, “those same share prices lagged behind the competition by 26% three years later.”) The only way to permanently lose weight is to change one’s lifestyle. That means both diet and exercise patterns must be modified forever. Is it easy? No. Is it fast? Not likely. But, does it work? You bet! LEAN JIT means permanently changing your company culture. Everybody (and I mean everybody) will see significant job changes. From top executives to professionals to support staff to operators to janitorial services, nothing will be the same. How can that happen if those people don’t understand the new perspective, don’t specifically know what to do or how to do it the new way? The training job is gigantic. All of the successful transplant companies recognized this when they came to America. Typically, they required new hires to undergo 400 to 800 hours of training (that’s 10 to 20 weeks) before they could even start producing products. Ongoing training requires one to two additional weeks per year. Yet, too many native companies seem to think that just talking about it or passing out some literature is sufficient. That’s like believing you can create competent mechanics by issuing everyone a repair manual. Even training a small cadre of “experts” is insufficient, when you are trying to create a new culture. LEAN JIT requires a workforce of thinking, creative teams of flexible people who all understand the concepts and the “how-to’s” of implementation. This is not to be confused with awareness training. (As Ron Zemke, Senior Editor of Training Magazine, put it, that’s like “Music Appreciation 101, with Deming, Juran and Crosby subbing for Bach, Beethoven and Tchaikovsky.”) LEAN JIT training entails a sizable investment in specifics that needs time to pay off, just like a piece of capital equipment. If your average payroll cost is only ten dollars an hour, 40 hours of training for 100 people is a $40,000 investment. For that kind of money, you should expect a significant payback and will need to be very selective about your training materials to secure it. THE LEAN JIT PAYOFF The rewards for implementing the demanding process I’ve just described will exceed your greatest expectations. Orders of magnitude quality improvement and double-digit productivity increases are routine. Producing products in half the space in less than half the time, with less than half the inventory investment, is commonplace. One of our clients reported a one million dollar profit improvement on only six million dollars of sales in his second full year of LEAN JIT implementation, and he’s nowhere near the end. The secret to success is accepting all the changes (i.e., the complete recipe) to make it happen and providing the necessary time for gestation and development. Buzzwords and jargon make for great conversation, but you have to “walk the talk” if you expect to achieve world-class results. It starts with the willingness of top management at the location, be it a plant, division or a company; to embark upon changes that are so significant that they will, indeed, result in a different company culture, even if the old culture is “comfortable”. But, as George Bernard Shaw put it, “The man who cannot change his mind cannot change anything.” After that, it’s persisting long enough to make those changes permanent, whether you call it LEAN JIT or XYZ. It doesn’t matter what you call it, it’s how you do it that counts.        Copyright © 2003 Ken Wantuck Associates, Inc. All rights reserved.